FocusAsia’s PA prices may stabilise after weeks of decline

24 May 2013 07:55[Source: ICIS news]

By Hazel Goh

SINGAPORE (ICIS)--Phthalic anhydride (PA) prices in Asia may stabilise following weeks of declinebecause of weakness in feedstock orthoxylene (OX) prices and continued slowdemand from the downstream sectors, market sources said on Friday.

Regional prices have shed around 10% from early March, with prices in China recording a steeper fall of 11.5%, while feedstock OX prices tumbled 12% over the same period, ICIS data showed.

Demand from the downstream plasticizer and unsaturated polyester resins (UPR) sectors has remained in doldrums amid a gradual recovery in the global economy, market sources said.

Economic data coming out of China, the world’s second biggest economy and a major importer of petrochemicals in Asia, was discouraging.

The country’s first-quarter GDP and its April industrial production grew at slower-than-expected rates of 7.7% and 9.3%, respectively.

Furthermore, the preliminary purchasing managers’ index (PMI) for China dropped to a seven-month low of 49.6 in May, indicating a contraction in manufacturing activities.

Recent volatility in the crude futures also added to the bearish picture on the Asian PA markets.

In the bearish PA market, PA producershave been making lossesbecause feedstock OX prices had been constantly higher than PA prices.

PA producers have made continuous efforts to minimise their losses. They have been limiting their drop in PA offers amid falling OX prices in a bid to reverse the negative margins or at least narrow them.

“There is no hurry to purchase [PA] because I think PA prices will fall further,” a southeast Asian buyer said.

A few northeast Asian sellers received fewer enquiries in recent weeks and volume per deal was reduced to 20-100 tonnes from more commonly 100 tonnes and above parcel size previously.

On a brighter note, a southeast Asian PA buyer sees an opportunity in the downstream paints sector as demand for paints to recoat houses is expected to increase in July, ahead of Eid Ul Fitr, a festival celebrated widely by Muslims.

The buyer said it planned to increase its purchase volume of PA if prices are suitable.

Nevertheless, the market outlook of PA remains uncertain, with some market players choosing to adopt a neutral stand about PA prices in the near term to avoid speculation causing unnecessary influence on the market.